Taxing remittances could be burdensome

BENGALURU: Many fear that it may be burdensome if the government begins to tax remittances. In Finance, the government has proposed a 5% tax collection at the source (TCS) for more than Rs 7 lakh under the Liberalized Remittance Scheme. This will block a large part of the funds for those who wish to send money abroad.

The finance bill establishes that banks that receive Rs 7 lakh from an individual for remittances outside India under the LRS or from a seller of a tourist package must debit an amount equal to five percent of the amount remitted as a tax on the rent.

The president of Manipal Education, Mohandas Pai, raised the issue of taxing remittances on Sunday. In a tweet to the FM, he asked: “5% tax collection at the source of remittances of more than Rs 7 lakh. Lord, this is very wrong; Why is there a tax on our own tax-paid money when we make remittances? Where is the ease of living?

TOI has reported that Indians on average send $ 1.5 billion (Rs 10.7 billion rupees) abroad each month for several reasons, such as student fees, travel, gifts and medical treatment. If it is taxed at 5%, the government can raise about $ 75 million each month.

Live plus India is one of the main remittance recipients, but external remittances are relatively low. The average global shipping cost was around 7% in 2019, according to the world Bank 'Remittance Prices Worldwide, database.

Now, with taxes, the amount sent abroad will be further reduced, said the technical director of a remittance company.

Shailesh Haribhakti, founder and principal mentor of the audit firm Baker Tilly DHC, said that in an era of declining interest and growth rates, it is very difficult to extract significant returns from LRS investments. This 5% deduction would require a review in light of the returns actually generated from LRS remittances. A simple analysis of the reported revenue will reveal the need quite clearly, he said.

KR Sekar, partner of Deloitte, said: It is an additional cost. If I have to send my son to study in the USA. In the US, why should I pay a 5% tax to the government? It is a ridiculous measure to impose taxes on these items on the premise that this is a luxury item, which is not the case.